What Are the Big 4 Accounting Firms? Definition and Critique

What Are the Big Four?

The “Big Four” is the nickname for the four largest accounting firms in the United States, as measured by revenue. They are Deloitte, Ernst & Young (EY), PricewaterhouseCoopers (PwC), and Klynveld Peat Marwick Goerdeler (KPMG).

Aside from auditing services, the Big Four offer tax, strategy and management consulting, valuation, market research, assurance, and legal advisory services. They are the leading source of tax law interpretation and experts on changes in accounting and auditing standards.

The Big Four also offer digital transformation consulting to serve the needs of companies in the digital age.

Key Takeaways

• The “Big Four” refers to the four largest accounting firms in the U.S.
• The largest accounting firms used to comprise the “Big Eight” but mergers and closures have reduced the number of top tier companies.
• These four firms audit the financial statements for the vast majority of publicly held companies.
• In addition to their auditing services, the Big Four provide tax, consulting, valuation, market research, assurance, and legal advisory services.
• Jobs at the Big Four firms are highly competitive and difficult to get; busy season is often more strenuous compared to other public accounting firms.

Understanding the Big Four

Through industry consolidation that began in 1989, what used to be the Big Eight has become the Big Four today. The eight, in alphabetical order, were Arthur Andersen, Arthur Young, Coopers & Lybrand, Deloitte Haskin & Sells, Ernst & Whinney, Peat Marwick Mitchell, Price Waterhouse, and Touche Ross—all U.S. or U.K. entities.

Arthur Young combined with Ernst & Whinney while Deloitte Haskin & Sells merged with Touche Ross to reduce the group count to six. Then, Price Waterhouse and Coopers & Lybrand merged their practices, making the total five. Following the collapse of Arthur Andersen, due to its proven culpability in the Enron scandal, the five became the present-day four.

The Big Four consulting firms perform most of the auditing work for some of the largest public companies in the world. In fact, the vast majority of Fortune 500 companies have their financial statements audited by one of the Big Four.

Big Four clients include such corporate powerhouses as Berkshire Hathaway, Ford Motor Co., Apple, Exxon Mobil, and Amazon. According to a 2018 report by the CFA Institute, 30% of the S&P 500 were audited by PwC, 31% by EY, 20% by Deloitte, and 19% by KPMG. In 2022, the Big Four continued to provide SEC audits to a large majority of publicly held companies.

With 360-degree views of companies and industries, the Big Four are authorities in the business. They have extensive recruiting and training programs for fresh graduates and offer prized conduits for tax and consulting professionals to and from various industrial sectors.

Each Big Four firm is a composition of individual professional services networks rather than a single firm. Each of these networks is owned and managed independently, having entered into agreement with other member firms to share the same name, brand, and standards.

Deloitte LLP

The largest of the Big Four, Deloitte’s workforce grew to over 345,000 employees during their 2021 fiscal year. The company’s annual revenue was $50.2 billion. It exceeded $50 billion for the first time, growing 5.5% from prior-year revenue. Worldwide, Deloitte operates in 150 countries.

Through fiscal year 2021, Deloitte employed more than 121,000 individuals within the U.S. It had 126 offices across 97 cities. Despite overall company growth, Deloitte’s 2021 United States revenue declined from 2020.

PwC

In 2021, PwC reported annual revenue of $45.1 billion, the second highest amount for Big Four firms but only up 2% (in its local currency) from the year prior. Revenue in the United States remained flat, though PwC is currently investing $12 billion to add 100,000 new jobs over the next five years to strengthen its global presence.

It is also making a $3 billion investment in quality-centric improvements including major advancements in audit technology. Worldwide, PwC operates in 152 countries and its global workforce numbers 328,000 individuals.

EY

During fiscal year 2021, Ernst & Young reported roughly $40 billion of company-wide revenue, an increase of 7.3% from the year prior. EY has recorded 7.3% compound annual growth over the past seven years.

EY recently announced a $10 billion investment in company expansion in an attempt to reach more clients and more successfully navigate their needs. At the end of fiscal year 2021, EY reported having 312,250 on staff. The firm operates in 150 countries.

KPMG

In fiscal year 2021, KPMG reported the equivalent of $32.13 billion of revenue in U.S. dollars with strong growth across multiple divisions. KPMG employs over 265,000 individuals across the world. It has an office in every state across the U.S. and operates in 143 countries.

Arthur Andersen and Enron

In 2002, “Big Eight” firm Arthur Andersen was discovered to have shredded documentation in an effort to hide Enron’s falsified financial numbers. Though one of the largest and most reputable firms at the time, it ultimately collapsed due to the scandal.

 
2021 Annual Revenue in U.S. Dollars
# of Employees
# of Countries of Operation/Headquarters

 Deloitte
$50.2 billion
345,000
150/London, UK

 PwC
$45.1 billion
328,000
152/New York City, U.S.

 EY
$40 billion
312,250
150/London, UK

 KPMG
$32.13 billion
265,000
143/Amstelveen, Netherlands

Criticism of the Big Four

The Big Four is not without its critics. Despite all its resources and inside access to companies, these giants have not been the ones to uncover massive frauds perpetrated by clients that have caused pain for shareholders and investors. For example, Enron and Worldcom were exposed by forensic accounting experts, not their Big Four accounting firms.

Critics say that the accounting firms do not want to ask tough questions of their paying clients or assiduously investigate something suspicious on their books. That would be tantamount to biting the hand that feeds you.

Salaries at the Big Four

While salaries change with time and economic circumstances, here are some average annual U.S. salaries for various positions at each of the Big Four accounting firms, as reported by Indeed.com. (The same positions don’t necessarily appear below for each company.)

Deloitte

Tax Analyst: $74,924

Accountant: $66,391

Certified Public Accountant: $71,151

Auditor: $61,857

Business Analyst: $74,814

Cybersecurity Analyst: $73,193

Source: Indeed.com

PwC

Tax Analyst: $71,493

Accountant: $54,774

Certified Public Accountant: $84,895

Auditor: $66,307

Business Analyst: $93,808

Cybersecurity analyst: $96,000

Source: Indeed.com

EY

Tax Consultant: $70,507

Accountant: $36,772

Certified Public Accountant: $88,543

Auditor: $83,890

Financial Analyst: $127,248

Information Security Analyst: $127,046

Source: Indeed.com

KPMG

Tax Consultant: $60,000

Accountant: $30,000

Accounting Manager: $117,622

Auditor: $104,772

Financial Analyst: $69,053

IT Security Specialist: $120,656

Source: Indeed.com

What Is the Biggest Big Four Accounting Company?

With $50.2 billion of revenue earned during its 2021 fiscal year, Deloitte is the largest of the Big Four firms.

What Services Do Big Four Companies Provide?

Each Big Four company has a diverse staff armed with varying levels of expertise to meet their client’s needs. In general, Big Four firms all provide audit, assurance, consulting, financial advisory, risk management, and tax compliance services. Each firm also assists with mergers, acquisitions, corporate restructurings, and forensic accounting.

What Is Busy Season Like at a Big Four Company?

The busy season typically means long hours of auditing or tax compliance work to meet reporting deadlines for clients. Big Four employees often work much longer hours during the busy season, sometimes doubling the hours worked during the off season.

The busy season typically begins at the start of the calendar year with many reports and returns due between January and April. Big Four firms are also busy during periods relating to companies’ quarterly reporting.

The Bottom Line

The Big Four refers to the four largest accounting firms in the U.S. While they employ a great number of people, these firms also have their critics. Primarily, people criticize them for not asking clients the tough questions necessary to uncover fraud.